Cirrus Logic(CRUS) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Cirrus Logic reported record revenue of $541.9 million for Q2 FY '25, which is near the top end of the guidance range, reflecting a 45$282.9 million with a gross margin of 52.2%, showing a sequential increase of 160 basis points and a year-over-year increase of 90 basis points [20][22] - Non-GAAP net income reached $125.3 million, resulting in a record earnings per share of$2.25 [22] Business Line Data and Key Metrics Changes - The flagship smartphone audio business saw significant advancements with the introduction of a next-generation custom boosted amplifier and a 22 nanometer smart codec, contributing to improved power efficiency and audio quality [11][12] - The camera controller product line continued to gain traction, with increased content value since its introduction in 2020, benefiting from favorable smartphone market conditions [13] - The laptop business is in early stages but has secured its first high-volume design win with a new PC codec, indicating growth potential in this segment [15][16] Market Data and Key Metrics Changes - The overall smartphone market is experiencing a favorable mix that includes more devices featuring Cirrus Logic's camera controllers, enhancing revenue opportunities [13] - The company anticipates growth in the laptop market, with multiple Tier 1 customers integrating Cirrus Logic components into their devices [15][16] Company Strategy and Development Direction - The company's long-term strategy focuses on maintaining leadership in smartphone audio, expanding high-performance mixed signal functionality, and penetrating new markets [10] - Investments in R&D for advanced power sensing and battery technologies are expected to diversify product offerings and expand market presence [14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the complexities in comparing December quarter results due to an extra week of production in the September quarter and a shift in fiscal year-end timing [35][36] - The company remains optimistic about future growth, emphasizing the importance of being positioned for growth even if smartphone unit sales remain flat [59][60] Other Important Information - The company ended the quarter with $706.6 million in cash and investments, with no debt outstanding and$300 million undrawn on its revolver [23] - Cirrus Logic plans to continue returning capital to shareholders through stock repurchases, with $224.1 million remaining in its repurchase authorization [27] Q&A Session Summary Question: December quarter expectations and content delivery - Management explained that the December quarter would face challenges due to an extra week of production in September and a comparison to a 14-week December quarter last year, impacting year-over-year comparisons [35][36] Question: Wafer obligations and inventory management - Management confirmed that they expect to build inventory into early FY '26 to fulfill wafer obligations, indicating a long-term selling strategy [40] Question: Impact of largest customer updates on supply chain - Management noted that the transition period is influenced more by the September quarter's timing than by customer updates, with ongoing excitement about new product features [43] Question: Growth opportunities in smartphone and laptop markets - Management highlighted that both content and unit growth are important, with significant opportunities for incremental additions and new sockets in the smartphone market [59][60] Question: Tracking of PC-focused products and revenue expectations - Management indicated that they are on track with low tens of millions in revenue from PC products, with expectations for a meaningful step up in FY '26 [56]